Economic slowdown materialises, new capacities reduce trade: Irepas

Posted on 07 May 2019

Source: Kallanish

Long products demand remains good in most regions, but the US and scrap markets are losing steam, while a steel asset build-up in many areas is limiting the long-term scope for large-scale international trade. So says the International Rebar Exporters and Producers Association (Irepas).

“Fears of an economic slowdown are gaining acceptance and risks of continued trade barriers restrict the outlook,” the association says in its May short-range outlook monitored by Kallanish.

The absence of China from export markets continues to give support to local production in other regions. This has allowed traditional importers, such as United Arab Emirates and Qatar, to become exporters to Asia. “It is of the utmost importance that the Chinese domestic market should keep internal demand active and continue consuming steel at the same speed in order to prevent a flood of exports arriving into the global market,” Irepas says.

US steel prices have come down somewhat, reflecting lower scrap prices. Since all domestic prices are below logical import prices with the Section 232 duties added, imports without special exemptions are not working out, Irepas says. There are no exemptions for rebar and wire rod, it adds. US mills disclosed “…mega” earnings for the first quarter despite the continued absence of Trump’s long-toured infrastructure stimulus.

EU market demand is “…not brilliant but stable,” Irepas continues. “Lately, we see that EU producers are active in the export markets in order to ease domestic pressure,” the association observes. “However, it is not possible for European exporters to match the prices in the markets which are not affected by protectionist measures.”

Turkey has been worst affected by global protectionism, according to Irepas, with its liquid steel and rebar production down -15% and almost -50% so far this year. When EU safeguard quotas are reset from 1 July, the quota allocated to “other countries” will not be made available to Turkish exporters until the last 90 days of this period. “That will certainly have a further impact on Turkish rebar exports,” Irepas warns.

The regionalisation of trade is positive for pricing despite the obvious problems of protectionism for consumers. With their domestic economy contracting, “…Turkish exporters are competing with everyone in the markets which are still reachable for them,” Irepas observes. “On the other hand, it is difficult to compete from long distance and then safeguards and tariffs do the rest."